From fitness trackers to drones, how the Internet of Things is transforming the insurance industry

The ability to bring internet connection to nearly every type of consumer device will have huge implications for the insurance industry over the next five years. Insurers looking to cut costs, improve business practices, and better assess clients' risk levels, will increasingly invest in the Internet of Things (IoT).

Some auto and health insurers are already offering a new type of insurance — usage-based insurance (UBI) that uses IoT devices to track clients' activity and offer discounts or rewards for healthy and safe behavior. We expect 17 million people will have tried UBI auto insurance by the end of this year.

In a new report from BI Intelligence, we examine the impact of the IoT on the insurance industry. From free fitness trackers to track individuals' exercise habits to drones to assess damages in unsafe post-disaster conditions, we analyze current US insurance markets — including the auto, health, life, and property insurance markets — and look at ways insurers are integrating IoT devices.

The IoT is also helping insurers reduce risk and mitigate costs in other ways.

Home insurance companies are incentivizing customers to install connected devices that warn of potential danger to properties.

IoT-based analytics can be used to predict future events, such as major weather patterns. This can help insurers better price policies and prepare customers for upcoming incidents, which should help reduce damages.

Property insurance companies are increasingly using drones to assess damages after an incident has occurred. Consulting firm Cognizant estimates that drones will make insurance adjusters' work flow 40%-50% more efficient.